The year before: What the fashion society looks like in 2023

In 2023, fashion leaders have an opportunity to review their talent rosters and team structures. Despite many challenges on the horizon, as inflation dampens consumer sentiment and costs rise for many companies, fashion leaders cannot put off the difficult work of transforming their organizations.

As fashion companies chase growth in the unpredictable year ahead, talent and organizational structures will become key performance differentiators. This follows an industry facing unprecedented challenges – from pandemics forcing remote working patterns to supply chain turbulence – forcing entrenched processes to evolve. Challenges are likely to persist in 2023 — 84 percent of fashion executives in the BoF-McKinsey State of Fashion 2023 survey expect the industry to worsen next year. This will impact their business; 97 percent expect their cost of goods sold as well as selling, general and administrative expenses to increase.

It will be tempting to put investments in talent and operational improvements on hold to focus on managing the economic slowdown. But the most successful leaders balance short-term crises with long-term needs by prioritizing new hires and promoting existing roles so their companies can grow. In our survey, 55 percent of executives cited talent shortages as one of the top three areas having the biggest impact on their business in the coming year. Executives should strive to align their organizations, from senior management to front-line employees, around key strategic themes that will drive growth.

For some companies, this moment may require elevating existing roles in critical areas such as sustainability, even creating new C-suite positions to fill the expertise gaps in senior leadership.

For other brands, there will be a greater need to build on existing functions, such as those that support omnichannel strategies, and empower them with expanded leadership roles that have increased decision-making responsibility and accountability. HR teams in charge of the company’s talent can be involved in expanding and promoting roles. When Chanel named Unilever’s chief human resources officer Leena Nair as its new CEO in 2021, the fashion brand signaled to teams of people across the industry that they were strategic operators. “HR is no longer a backroom department,” Nair said in an interview before her appointment. “It’s an essential part of running any successful business.”

Ripple effect

The talent market is ripe for a reset. The sharp increase in voluntary attrition since the start of the Great Resignation in 2021 has exposed a deep rift between companies and their employees – in the US, for example, it has led to 25 percent higher voluntary resignation rates than before the pandemic. According to a recent survey by McKinsey, 76 percent of people who have left their jobs in consumer retail since the start of the pandemic have joined another sector, the highest exit rate of any industry.

Half of fashion professionals believe the industry has lost the appeal it once had as other industries such as technology eclipse it in terms of career growth opportunities and salaries. The exodus can also be seen in C-suites as top executives leave for roles outside the fashion industry.

The employee exodus is unlikely to be fully reversed as economic conditions worsen next year. Retail workers remain difficult to retain, with 50 percent of U.S. frontline workers and 63 percent of retail managers saying they are considering leaving their jobs. Many people quit because they are looking for better opportunities for career advancement, more work-life flexibility or higher pay. Companies will feel more pressure to offer clear career paths along with prioritizing culture, employee health and flexibility to attract top talent regardless of role or seniority.

In the meantime, the industry still needs to address diversity, equity and inclusion, including in senior management positions. DE&I experts suggest that the industry’s work has only just begun when it comes to racial and ethnic diversity. Men made up 76.9 percent of all named CEOs in the fashion industry in 2021, according to retail merchandising company Nextail. Less than one-third of board positions at UK-listed fashion retailers are held by women, according to an annual survey by Drapers.

The new C-Suite

As fashion companies prepare for future challenges, some are reassessing their senior team structures and taking the opportunity to introduce new or adapted C-suite roles that focus on increasingly important areas such as diversity, sustainability or logistics. Among other benefits, these appointments send a signal to the rest of the company, shareholders and customers about where management is focused in the short and long term.

One C-suite role emerging in the industry aims to help address companies’ sustainability practices. C-suite teams in almost all of Europe’s top 25 fashion companies can count on at least one executive with environmental, social and governance experience. These leaders design and implement a range of sustainability strategies, from reducing carbon footprints to reducing waste to improving labor relations. Sustainability leaders are most successful when they are integrated into the rest of the business. Rather than creating an entirely new role, some companies are introducing a sustainability component to an existing one.

British fast fashion retailer Primark, for example, has appointed Michelle McEttrick, the company’s first chief customer officer, to lead its sustainability strategy. These roles can also open the door to a top C-suite job. For example, at Swedish fast fashion H&M, Helena Helmersson was named CEO in 2020 after serving as the company’s head of sustainability.

Supply chain roles are also gaining importance in the C-suite, primarily due to the increasingly complex nature of manufacturing today. Supply chain directors are the strategic bridge between manufacturing, purchasing and sales, and operations and planning, while serving as a conduit for robust risk management and mitigation. Their work requires a broad view across departments to respond to crises, enable their companies to innovate manufacturing strategies and recruit specialized logistics talent.

Another C-level bridge-building position is Chief Omnichannel Officer, a role that consolidates offline and online channels under one operational umbrella as brands reevaluate brick-and-mortar strategies alongside e-commerce and other channels. For example, Parisian label Isabel Marant appointed a new head of omnichannel in September. Meanwhile, new chief experience officers, chief brand officers and chief technology officers are tasked with overseeing and unifying the customer experience across distribution channels at companies such as Under Armour, Moncler and New Look.

Even outside the C-suite, many fashion companies are investing in digital and data expertise to become omnichannel-first organizations and achieve enterprise-wide digitization. For consumer companies featured in the Best Places to Work rankings, half of the executives surveyed said their businesses are integrating digital teams across functions and geographies. In contrast, only 26 percent of respondents could say the same in companies lower in the ranking. Companies that ranked high were also 1.4 times more likely than their low-ranked counterparts to maintain digital teams in-house rather than outsource.

Meanwhile, fashion executives have the opportunity to strengthen the teams responsible for communication strategies at a time when their companies can be expected to take a stand on sensitive topics affecting society as a whole, such as the war in Ukraine. Institutional communications and liaison roles will require expertise in areas such as climate change, trade policy and data protection. These roles will be essential in ensuring that brands are able to make meaningful contributions not only to trade organisations, but also to cross-sector forums and policy-making bodies.

For example, LVMH is an official partner of the World Economic Forum in Davos, while Kering’s Chief Sustainability Officer is also Head of International Institutional Affairs.

As the fashion industry intersects with government regulations that have a high potential to impact business operations, communications and public relations teams will play a larger role.

For consumer communications on complex social issues, these teams will need to understand the changing concerns of different audiences and collaborate with other internal teams – such as diversity and inclusion leaders, marketing strategists and sustainability specialists – to create campaigns and messaging.

Preparing for change

Even in today’s era of tighter cost management, fashion companies will need to prioritize investing in new skills and collaboration structures. A successful talent strategy will require hiring and reskilling, forcing HR teams to identify current and future skills gaps and strategize how to address them.

According to the 2021 survey, nearly 90 percent of executives anticipated a skills shortage in their organizations, but only one-third said recruiting plans were robust enough to address talent challenges. In 2022, fashion executives cited supplier management, artificial intelligence and automation, and omnichannel customer experience as the biggest capability gaps in their organizations.

Competition for the most sought-after roles will be fierce across the industry. These include ESG compliance specialists, including lawyers who focus on international law and can help companies navigate evolving ESG-related regulations. Supply chain and operations leaders are also sought after, as well as support roles such as merchandising range planners as well as logistics and pricing specialists.

There is plenty of room for upskilling and retraining with the dual benefits of serving as a retention tool and increasing the company’s competitiveness. Even in economically uncertain times, the business case is good: education and training typically generate a return on investment that is two and a half to three times higher than hiring, according to McKinsey research.

This has not been lost on large companies, which are already investing massively in employee training. As part of its “Upskilling 2025” initiative, Amazon is investing $1.2 billion to train more than 300,000 employees for more skilled jobs as automation eliminates many existing roles. At major retailer Walmart, training support ranges from workshops on basic retail and emotional skills for front-line staff to grants for permanent staff to study retail management at university.

Enabling agility across the organization will be critical to building the resilience needed in 2023 and beyond. Speed ​​will be essential, supported by cross-functional teamwork that avoids silos and allows fashion managers to allocate their talent to strategic themes they believe will unlock growth. Top management must be ready for change. Leadership teams must include executives with a diverse range of skills that reflect strategic priorities.

Above all, fashion leaders will need to prioritize talent and rethink organizational development as the competitive advantage it has become. HR leaders will need to continue to rethink how employees work together to ensure balance and efficiency in remote or flexible work policies that keep people connected. Companies defined by strong leaders in diversity and inclusion and focused on transparency will help attract top talent and enable businesses to evolve and become even more resilient in the years to come.

This article first appeared in State of Fashion 2023an in-depth report on the global fashion industry jointly published by BoF and McKinsey & Company.